Dick's Sporting Goods 2015 Annual Report Download - page 50

Impairment of Long-Lived Assets and Closed Store Reserves – The Company evaluates its long-lived assets to assess whether
the carrying values have been impaired whenever events and circumstances indicate that the carrying value of these assets may
not be recoverable based on estimated undiscounted future cash flows. An impairment loss is recognized when the estimated
undiscounted cash flows expected to result from the use of the asset plus eventual net proceeds expected from disposition of the
asset (if any) are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the
asset is reduced to its estimated fair value as determined based on quoted market prices or through the use of other valuation
techniques.
The Company recognizes a liability for costs associated with closed or relocated premises when the Company ceases to use the
location. The calculation of accrued lease termination and other costs primarily includes future minimum lease payments,
maintenance costs and taxes from the date of closure or relocation to the end of the remaining lease term, net of contractual or
estimated sublease income. The liability is discounted using a credit-adjusted risk-free rate of interest. The assumptions used in
the calculation of the accrued lease termination and other costs are evaluated on a quarterly basis. The current portion of
accrued store closing and relocation reserves is included within accrued expenses and the long-term portion is included within
long-term deferred revenue and other liabilities on the Consolidated Balance Sheets. The related expense is recorded within
selling, general and administrative expenses on the Consolidated Statements of Income.
Goodwill – Goodwill represents the excess of acquisition cost over the fair value of the net assets of acquired entities. The
Company assesses the carrying value of goodwill annually or whenever circumstances indicate that a decline in value may have
occurred.
The goodwill impairment test is a two-step impairment test. In the first step, the Company compares the fair value of each
reporting unit to its carrying value. The Company determines the fair value of its reporting units using a combination of a
discounted cash flow and a market value approach. If the fair value of the reporting unit exceeds the carrying value of the net
assets assigned to that reporting unit, goodwill is not impaired and the Company is not required to perform further testing. If the
carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the Company
must perform the second step in order to determine the implied fair value of the reporting unit's goodwill and compare it to the
carrying value of the reporting unit's goodwill. If the carrying value of goodwill exceeds the implied estimated fair value, an
impairment charge to selling, general and administrative expenses is recorded to reduce the carrying value to the implied
estimated fair value. A reporting unit is the operating segment, or a business unit one level below that operating segment, for
which discrete financial information is prepared and regularly reviewed by management.
Intangible Assets – Intangible assets consist primarily of trademarks and acquired trade names with indefinite lives, which are
tested for impairment annually or whenever circumstances indicate that a decline in value may have occurred. The Company
estimates the fair value of these intangible assets based on an income approach using the relief-from-royalty method. The
Company's finite-lived intangible assets consist primarily of favorable lease assets and other acquisition related assets. Finite-
lived intangible assets are amortized over their estimated useful economic lives and are reviewed for impairment when factors
indicate that an impairment may have occurred. The Company recognizes an impairment charge when the estimated fair value
of the intangible asset is less than the carrying value.
Self-Insurance – The Company is self-insured for certain losses related to health, workers' compensation and general liability
insurance, although we maintain stop-loss coverage with third party insurers to limit our liability exposure. Liabilities
associated with these losses are estimated in part by considering historical claims experience, industry factors, severity factors
and other actuarial assumptions.
Pre-opening Expenses – Pre-opening expenses, which consist primarily of rent, marketing, payroll and recruiting costs, are
expensed as incurred. Rent is recognized within pre-opening expense from the date of building turnover to the Company
through the date of store opening.
Earnings Per Common Share – Basic earnings per common share is computed based on the weighted average number of
shares of common stock outstanding during the period. Diluted earnings per common share is computed based on the weighted
average number of shares of common stock, plus the effect of dilutive potential common shares outstanding during the period,
using the treasury stock method. Dilutive potential common shares include outstanding stock options, restricted stock and
warrants.
DICK'S SPORTING GOODS,€INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
44